A law firm which held money on behalf of its then litigation funding subsidiary has been fined for allowing its client account to be used as a banking facility.
The Solicitors Regulation Authority (SRA) has fined Peterborough-based Milberg Ltd, an alternative business structure, £21,000.
The firm is the claims-handling arm of Milberg London, an affiliate of the well-known US class action practice Milberg Phillips Grossman.
Milberg Ltd used to be known as Ferguson Financial Solicitors, but whereas Ferguson helped insolvency practitioners process mis-selling claims against financial institutions, Milberg is focused on UK collective redress cases, like the Volkswagen and Mercedes emissions litigation. Ferguson Litigation Funding (FLF) spun out of the ABS in 2016.
According to a regulatory settlement agreement published by the SRA today, Milberg Ltd accepted funds into its client account in relation to two litigation matters FLF was backing when it had no involvement in them.
In 2017, Milberg received four payments totalling £3m, which included monies it received from three investment companies; it did not check their source. More than £2.5m of this went to the case and the firm only returned the rest to the investment companies in July 2019 when prompted by the SRA investigation.
In 2018, FLF was backing a company making a breach of contract claim and paid £175,000 into Milberg’s client account to be used as security for costs. This was paid over to the claimant’s solicitors a week later, after the funding agreement was signed.
Providing a banking facility is in breach of the rules. The SRA said a fine was appropriate because Milberg’s conduct “had potential to cause significant harm” and the firm admitted it had acted recklessly, including holding the emissions litigation money for two years.
In mitigation, Milberg said there were no other instances where it has done this, while it saw documentation to satisfy itself that the funds were to be used by other firms of solicitors for genuine litigation.
The firm knew where the funds had come from in the contract litigation, and it believed source of funds checks had been carried out by one of the investment companies in the emissions litigation.
“A fine is appropriate to maintain professional standards and uphold public confidence in the solicitors’ profession and in legal services provided by authorised persons,” the SRA said. “Any lesser sanction would not provide a credible deterrent to the firm and the wider profession.”
The SRA’s fining guidance put the misconduct into the bracket of £25,000 to £50,000. The regulator initially set the penalty at £30,000 in recognition of the mitigation and because Milberg rectified the breach once it was brought to its attention. Further, it did not cause actual loss or harm to the claimants.
It then reduced this by 20% in recognition of Milberg’s early admissions and a further 10% reduction for the steps taken to return the funds and remedy the breach.
“The firm does not appear to have made any financial gain or received any other benefit as a result of its conduct. Therefore, no adjustment for this is necessary,” it added.